FIGURES RELEASED last month showed that American consumer-price inflation hit 4.2% year-on-year in April, the highest rate since 2008. Markets were spooked. Investors feared that higher inflation and interest rates could destroy asset values. Then, on June 10th, came worse news, or so it seemed. In May annual inflation rose higher still, to 5%. Prices climbed by 0.6% that month alone. But this time financial markets were sanguine.
Economists crunching the latest inflation data have found soaring used-car prices to be the prime culprit behind the surge. About a third of May’s overall month-on-month rise came from the appreciating value of cast-off cars. According to official figures, from the Bureau of Labour Statistics, the prices of used cars and trucks have risen 30% over the past year. Many in the automotive industry think that is an underestimate.
That helps to explain the direction that prices are travelling, but not their turbocharged speed. For that, look at the recent history of the car-rental business. When the pandemic began, travel stopped and almost no one wanted to hire a vehicle. With bills to pay, most car-hire firms were forced to sell their vehicles at fire-sale auctions. But now, with restrictions being eased, demand for hire cars has bounced back faster than expected.
Cox Automotive, which owns Manheim, forecasts that used prices will continue to rise over the next months. That is hardly a surprise. Ford, America’s second-largest carmaker, recently said it expected to produce 1.1m fewer vehicles than planned this year—a fifth of its usual production—owing to the chip shortage.
Lol. Y’all act like you my Econ 101 years prof at Yale! Lolz. Mmhmm and increased demand increases what now? And he did it at least once a class. Shoutout to Yale and YaleLawSch for some real good education! teachersrock
thanks